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Experienced member

As the dollar headed south over the last 6 months, many wondered if it was about to collapse. Hedge funds, mutual fund managers, individual traders and investors had and are still short the dollar. The rally since March has coincided directly with the fall in the dollar. The yearly highs on the dollar were made in the first week of March and sure enough, the low of 666 on the S&P was also hit in the first week of March. Clearly, the rally has been a re inflation rally but there are other factors at work. The Federal Reserve has been a direct culprit of weakening the dollar. Believe it or not the dollar's drop was an obvious method of the Federal Reserve and possibly the PPT (Plunge Protection Team) to stop the markets from collapsing.

While technical analysis provides us with almost every major and minor move of the markets, oil, gold and the US Dollar, common analysis of motives of the Federal Reserve must also be analyzed. This adds a new dimension to confirm and solidify the technicals. We all know the Federal Reserve has been printing money, trillions in fact. Money to buy bonds, bailout banks, stimulus packages and more. However, it goes even deeper. Ever since the run up in the markets dating back to 2006 to 2007, oil stocks and other commodities have been added to the S&P 500. The weighting has increased more and more. This has made it so the market's overall are tied extremely tightly to the price of oil and other commodities. Therefore, the price of commodities is directly related to the levels of the S&P and other indexes. To manipulate the price of commodities higher would have a direct bailout effect on the markets. When oil is higher, the markets are higher.

Knowing this, it is no wonder that when the dollar topped out in March, the markets also bottomed. The Federal Reserve has a direct impact on the dollar. They are the printers or the money tree of the markets and the United States. This, alongside the bailouts and stimulus packages (which are both dilutive and cause the markets to drop) were bullets in their gun to help the markets regain their strength.

The problem is, it is a double edged sword. While causing the dollar to fall in the near term has helped the markets regain their mojo, it can have very detrimental effects. Our country is financed by other countries as they buy our debt. This is seen in the form of bond auctions where the interest paid is on the rise. If the dollar is losing value rapidly, other countries do not want to buy our debt. This is mainly due to the fact that in 10 years, 20 years or 30 years, these countries expect the dollar to be valued much lower based on the current drop priced out over those longer time periods. The only way they will buy the debt is if a higher interest rate is paid making up for the dollar's drop plus a profit. So, while a dropping dollar is great for the markets in the near term, if the money flow is turned off, we could spiral into a new liquidity problem even worse than what we saw in late 2008 and early 2009.

Now looking closely at the dollar recently, InTheMoneyStocks Chief Market Strategists saw a major technical support level on the dollar. On the UUP (dollar ETF) it was at $23.00-$23.05. This happened to be a major pivot from 2008. Closer calculations revealed it was a monstrous support level and cycle level as well. While this was a dead on indicator that the dollar was about to bounce, the Manipulation Factor confirmed it. What was this manipulation factor? As the dollar approached the major 2008 support level, Chief Market Strategists also realized that in the coming days there was a 3 year, 10 year and 30 year auction. There was no way the Federal Reserve was going to let the dollar continue to collapse into this auction. Why not? Because foreign countries, our debt buyers would be less inclined to bid on it in a free fall. In other words, push the dollar higher into the auctions to increase the likelihood of buyers willing to purchase the bonds for a lower interest rate.

Sure enough the dollar rallied on the InTheMoneyStocks call. This new factor, the Manipulation Factor must be used in conjunction with technical analysis. It is a great confirming indicator and can truly help one make profits. Look at the bigger picture; it was clear as a bell in this case.

Learn the game. Nothing is as it seems but a well educated investor can be aware and avoid the traps even profiting from the Manipulation Indicator.

Experienced member

Market Sells Early On China Drop, Oil Weaker And US Dollar Slightly Stronger..Worri

Market Sells Early On China Drop, Oil Weaker And US Dollar Slightly Stronger....Worries On Recovery

It all started last night with China....China dropped nearly 7% last night as worries remain. The key with China is that they spent all their stimulus money to buy up commodities and pump the economy assuming when it was spent, the US consumer would be back to spending. However, their stimulus money is spent and the US consumer is not spending. This is causing panic in China and their stock market is now down about 20% for the month of August. The US markets have yet to really sell as early day selling, generally leads to late day floating because of lack of volume and buy programs. Today is starting the same, will it end the same? Keep in mind that while volume is decent so far, by mid day and late day, there may be no volume. This week is one of the highest vacation weeks for traders. Markets continue to sell, watch the key 10am and 10:30am ET key reversal time frames. Watch the $102 level on the SPY and right below that the $101.75 level.

Experienced member

Lately it has been very common for the SPY to make a low in the first half of the trading session and move higher throughout the day. This has been the layup trade for months. If the financials are not rallying it is usually the energy stocks. Keep this play until it fails especially in this light volume environment..

Experienced member

The market gapped lower and then started to rip. It raced higher as the dollar came in, oil rallied and the market awaited the 10am economic news. The news came out generally positive across the board. The markets shot higher initially and have now whipped lower. Overall, the markets are slightly positive on the day. Volume should decrease as the day goes on. Keep an eye on $102.50 as support on the SPY and $103.25 as resistance.

Experienced member

2009 is now being called the turnaround of the “great recession.” For the sake of the world, I suppose this is better than the “Second Great Depression.” However, one must ask, what has really been changed?

Easy money was, and remains to be the cause of every boom and bust. Now, let’s examine the current scenario and see how it stacks up. It could be said that the $8000 first time home buyers tax credit is easy money. Then isn't the recent $4500 cash for clunkers deal also easy money? What about the greatest coordinated global stimulus package the world has ever seen, isn't this more easy money? Accompany this with the greatest bailout in world history of the “too big to fail” banks and you are left with an insurmountable amount of easy money – believe it or not, this is only the beginning. So, what has really changed? The answer is simple, absolutely nothing. Aside from the feverish printing of further ill-considered, easy money dollars, foreclosures, delinquent mortgages, lack of savings by U.S. Citizens, and poor job creation will be around for the next 7-10 years.

2010 should behold one very similar trait to other zero years of a decade, and that is down. It is very possible to see a retest of the 2009 lows and possibly a move lower. This market is not going much further for years to come. Repeating what brought this economy to its current state will only perpetuate the current problems, and prolong a cure. Consider this, if an individual maxes out their credit lines, they cannot simply wipe their hands clean and obtain new lines in an effort to bail itself out. Well that is exactly what the U.S. Government and most other governments including China have done. Regardless of political standpoint, be it democrat or republican both are as guilty as the other. Stimulus plans have been taking place since the beginning of the George W. Bush administration in 2001 and have actually grown with the Obama administration in 2009. Has spending been cut? The answer is NO! Both parties have spent like drunken sailors back at port from a year at sea.

This market has rallied on a bombardment of money printing and liquidity being thrown into the system, it’s that simple. 2010 will undoubtedly be a reality check for the public. However, the odds stack up high in favor of the government printing and throwing more money at the problem. In fact, if Las Vegas put odds on this event occurring it would most likely be an even money bet right now. Currently, this can all be seen as an attempt to re-inflate this flat tire. The question remains, how many patches can someone put on a tire before they need a whole new wheel? Going forward the powers that be better hope the flat tire doesn't cause the car (economy) to drive off a cliff, or hit a brick wall, where it is beyond repair.

Experienced member

The market is nearing a cataclysmic event and all traders, swing traders need to watch. The trend line below shows us that a close below could signal a hard sell for the rest of the day while staying above will no doubt take this market to $107. The markets are literally on a major point here on this Whipsaw Wednesday and looking for guidance. The nutty market has traded higher over the last two weeks after a big four day drop. As the market continues to just put minor up days together, we see the administration is doing whatever they can to keep this market floating and not crashing. So far it has worked and it has been impressive. Never before have you had such interference in the markets as what we see now. In any case, note how every wild card card is being used every day now to keep this market floating higher. Yesterday it was Bernanke saying the recession was over, today Warren Buffet said things were better than one year ago and he was buying stocks. Last week, Geithner had a town hall meeting to pump, pump, pump and let's not forget Obama has been on tv sometimes twice a day to pump things up. Regardless of everything that has been said above, just follow that trendline. As long as we stay above that trendline, this market is going to $107 on the SPY. If we break it though, watch out!

Experienced member

With a total of 195 billion in auctions this week, the dollar has caught a bid in the last few days. Why? The free fall in the dollar has had small bounces along the way. This usually happens just before and during large treasury auctions. The logical thinking behind this is that in order to get rid of the US paper, the government cannot have a dollar that is collapsing. When the dollar moves lower quickly, higher interest amounts must be paid to buyers of the US debt to entice them to buy it. So in theory, if the dollar was truly collapsing, there may be no buyers or buyers that would only buy if they were paid 10%, 20% or higher interest rates. Now granted, my example is unrealistic in the near term but you all get the picture I am sure. So please note, for yourselves how the dollar seems to get a mysterious pop going into these large auctions. Could it be some manipulation to try and get more buyers at lower rates for our massive ever expanding debt? I think so. As the dollar firms, follow it into the last day of auctions and see if the dollar starts to drop again. Watch this closely, controlling the dollar directly controls the markets.

Having said that, the dollar of course gained today just before the auctions begin. The markets were mixed to lower with the DOW and S&P losing about 0.4%. Oil was crushed as I had issued a sell signal last Thursday/Friday based on trend line analysis techniques. In addition, technology was extremely strong with the Nasdaq posting a small gain on the day. Volume was very light as it looks like the markets may be on hold until we get the FOMC policy statement on Wednesday at 2:15pm ET.

Legendary member

Experienced member

Today Is A Fascinating Day In The World Of The Markets...What Could This All Mean?

The markets are trading flat to slightly higher on extremely light volume. The Federal Reserve began their two day policy meeting and will announce the results tomorrow at 2:15pm ET. This is the major contributing factor to the light volume. What makes today so interesting? Simply put, the dollars action in regards to the the markets. The dollar is getting absolutely blasted today. In fact, after two days of bounces, the dollar has just hit a new 52 week low. The interesting facet to analyze is the markets are only up slightly on the day. This can be looked at as a possible change in character for the markets. Usually any minor weakness in the dollar gives a big push to the markets to the upside. A solid down day on the dollar gives an even bigger pop. Yet here we sit, watching the dollar get smoked and the markets are just slightly higher on the day. Could this be the start of a decoupling of the US dollar from the US markets? Could we be looking at a major change in character. Or are the markets overbought to the point of exhausting and cannot go any higher in the near term. It is interesting to note as well that the dollar is at its 52 week lows and oil is still hovering $5 or so off its highs. If you analyze that difference, that tells us that oil has dropped slightly in recent weeks due to a down grade of the global demand. If it was not a demand issue and purely a dollar play, then oil should be at new highs just as the dollar hits new 52 week lows. This dollar continues to be the driving force behind any major move in the markets though it may be starting to weaken slightly. Watch the dollar closely as there is 195 billion in auctions this week and the FOMC Policy Statement on Wednesday at 2:15pm ET. Most likely, we are in for a wild ride. The question is, which way do we go!

Experienced member

The SPY pattern played out perfectly per the post at 10:51am alerting to it to all blog viewers. Note the chart below as the in spirit of bear flag pattern went to the target. Learn price, pattern and time!

Experienced member

The year was 2007 and the markets were in rally mode. Every economist with the exception of a handful didn't see any problems on the horizon. This was after a sharp downturn in late February 2007 when the market dropped 500 points in a single day. Yes, this was when 500 point declines was not common place. Even after such a sharp drop every economist that I heard was still saying it was a blip on the screen and everything is fine. Sub prime was fine and under control and another rally followed. Then in July of 2007 the markets experienced another sharp decline into August and even then the new Fed Chairman said things were fine. The markets rallied once again into October of 2007 as all looked well in Mayberry. Analyst's from various brokerage firms were literally fighting to upgrade Google to levels over $1500 a share when GOOG was already at a new high and $700 a share. It still amazes me that none of these so called expert analysts and economists from one of the big banks like Citi Group downgraded themselves. By the way Citi Group was over $50 a share at that time.

Then it happened, the next great leg down occurred in one of the most vicious bear markets since the 1930's. The economist's out there all said the markets are fine and will recover shortly(December 2008). The markets nose dived into March 2008 when Bear Stearns collapsed and was bought by JP Morgan for $2 bucks a share(they later paid $10/share to appease the public).

In March 2008, the market rallied after the Bear Stearns collapse which was not called by any analyst or an economist that I know of. The low on the SPX in March 2008 was 1256 and when the SPX hit 1440 in May the bulk of economist's and analyst's everywhere were proclaiming a new growth cycle. Then on May 19th, 2008 the next move down took place in a violent, and fast decline. What happened to the new growth cycle?

As we all know the market has now put in a low in March 2009. This is on the back of a global coordinated stimulus plan by all central banks, a zero percent Fed's fund rate, and money printing that the world has never seen before. What else could the market due for a few months but rally with that kind of liquidity? However, the analysts, and the economists are back in full force. Upgrades and downgrades are occurring like it was 1999 again(we all remember what happened in 2000). It still amazes me that people are upgrading JPM and the rest of the bank stocks now when these stocks have rallied 300%. Where were the upgrades when theses stocks were in the single digits or when JPM was $15 bucks. Lets not forget Goldman Sachs hit a low of $47 a share in late 2008 as well. However, the upgrades come pouring in when it hit $150 a share. Lets not forget all of these stocks have done huge secondary offerings diluting their shares so they are really above their 2007 highs in real terms. Yet the analysts love them up here and the economists say the world is on the road to recovery.

When the economists and analysts all say things are well in Mayberry it is time to get worried. This is something that much be watched. Why? Because it has called every major top in the market since 2000. I'm just waiting for someone to upgrade Lehman Brothers (that still trades on the pink sheets). Then I will know the top is certainly in.